Foreclosures among owners of million-dollar homes on the rise [video]

Elvira Grau, the Englewood-based party planner who appeared on “The Real Housewives of New Jersey,” and her husband have lost their $3 million Cresskill home to foreclosure.

It’s one of a growing number of high-end foreclosures — a sign that housing distress is not limited to lower-income neighborhoods.

Elvira and James Grau own Space Odyssey, a former warehouse in Englewood that they bought in 2005 and turned into a 26,000-square-foot entertainment venue. Elvira Grau made an appearance on “The Real Housewives” reality show in 2010, planning a party for one of the show’s stars, Teresa Giudice. But the Graus were apparently not able to keep up with the $17,500 monthly payments.

Million-dollar-plus foreclosures like the Graus’ are rare, but are on the rise, according to RealtyTrac, a California company that follows the foreclosure market. Although the numbers of foreclosures on properties with mortgages over $1 million are still tiny — less than 2 percent of all foreclosures nationwide — they’ve more than doubled since 2007, RealtyTrac said. In Bergen County, more than 70 foreclosures of million-dollar-plus properties have been auctioned since January 2010, according to the sheriff’s office.

For buyers of luxury homes, the rising number of foreclosures in this price range offers the potential for better deals, since foreclosed homes generally sell at discounts that could total hundreds of thousands of dollars.

As in the case of the Graus, high-end foreclosures often involve business owners, according to several observers.

But whether it’s a $200,000 house or a $2 million house, the basic story is the same. During the housing boom, households took on too much debt, in the form of mortgages or home equity loans. Often, the mortgages were exotic loans with low initial payments that were followed by higher costs later.

When families faced job losses or other economic setbacks as the economy fell into recession, many couldn’t keep up with the mortgage payments, said Daren Blomquist, a RealtyTrac vice president.

High-end homeowners in trouble have taken longer to fall into foreclosure because they typically had more of “a financial cushion to fall back on, to keep making their mortgage payments,” Blomquist said. “They’ve been able to hold out longer.”

Phyllis Salowe-Kaye, head of N.J. Citizen Action, the state’s largest housing counselor, said these homeowners often took equity out when their houses appreciated in value during the boom.

“We’ve seen instances where the husband and wife both worked on Wall Street, and three years ago, they lost their jobs,” she said. “They’re doing different jobs and living in homes with mortgages up to $1 million, and there’s no way they can pay that.

“They have the same problem as someone who has a $200,000 house or a $400,000 house that’s being foreclosed,” she continued. “At some point, somebody’s going to take their house.”

But the million-dollar homeowners often have less access to help from government programs. For example, the N.J. Homekeeper Program, which helps unemployed homeowners, is not open to households with mortgages above $429,619.

Some owners of high-priced homes try to head off foreclosure by seeking a short sale, in which the lender accepts less than is owed on the mortgage. Awilda Delgado of Century 21 Calabrese Realty in Englewood Cliffs has such a listing in Paramus — a five-bedroom, 4,100-square-foot home with an asking price of $1.2 million, down from its 2006 sale price of $1.3 million. She has had several short-sale listings for $1 million and up.

“A lot of these people had interest-only, adjustable mortgages,” Delgado said. By the time they were hit with higher monthly mortgage payments, the sour economy had torpedoed their businesses or jobs, and they couldn’t afford their homes, she said.

Jeff Adler, a real estate agent with Keller Williams in Ridgewood, often lists foreclosed properties and recently had two bank-owned listings in the $1 million range — one in Haworth and the other in Franklin Lakes. The Haworth house is for sale for just under $1.1 million — $250,000 less than its price in 2008.

Blomquist of RealtyTrac said that bank-owned properties sell, on average, for about 27 percent less than market value, mostly because the banks are motivated to sell. Adler, however, said that while lenders are quicker than other sellers to cut the price for a fast sale, they still want to get as close to market value as they can. As a result, he said, most foreclosed high-end homes sell for almost as much as similar homes nearby.

In any case, both men agreed that buyers would get the benefit of prices that have come down more than 25 percent in the region since the peak of the housing boom in 2006.

Both Adler and Salowe-Kaye said that when foreclosure looms, owners of expensive homes are less likely to accept the reality of the situation than other homeowners in distress.

“They don’t believe that anybody could possibly take away their house,” said Salowe-Kaye.

The Graus bought their 6,561-square-foot, 12-room home at 134 Hoover Drive in Cresskill in 2008. They paid $3.05 million, taking a $2.5 million mortgage from the seller, Paul Schmidt, an executive at an Englewood apartment management company. At 7.5 percent, the Graus’ mortgage payments came to $17,500 a month, according to public records. They apparently had trouble keeping up with the payments, because Schmidt began foreclosure proceedings in early 2011.

Schmidt repossessed the property at a Bergen County sheriff’s auction earlier this summer, when no one outbid him.

Neither Schmidt nor the Graus responded to requests for comment. The Graus have had other financial setbacks, including judgments for unpaid state sales and income taxes related to Space Odyssey — about $269,000 in 2010, and $13,556 this year, according to the state Treasury. And Space Port, an entertainment space they opened in Paterson’s Center City mall, was shut down in 2010 after, according to the landlord, they failed to pay the rent.

The Cresskill house, with a library, two-story great room and pool, recently went on the market, with an asking price of just under $2.7 million. According to the listing real estate agent, Donnie Belgiovine of Coldwell Banker in Tenafly, a buyer quickly made an offer, and it went under contract for an undisclosed price.